Boeing Co, the world’s largest planemaker, on Wednesday said India is witnessing air passenger growth but it is difficult for airlines to make money.
India recorded double-digit growth in domestic air passenger traffic for the 50th straight month in October as it continued to top the worldwide growth charts, as per a report by the International Air Transport Association (IATA).
As rising income spurs an air-travel boom in the Asia's third-largest economy, low-cost carriers are attempting to lure passengers by offering discounts that have pushed down fares so low that they can barely recover costs.
Adding to their expenses is a surge in crude oil prices. While jet fuel accounts for about 24 percent of a carrier’s average costs globally, it is 34 percent in India, according to the IATA.
"Fares in India are amazingly low despite high taxation on ATF (aviation turbine fuel)," Dinesh Keskar, senior vice-president of sales for Asia Pacific and India at Boeing said at a media briefing.
The Chicago, US-based Boeing expects India's domestic aviation travel growth at 18 percent this year vs 17 percent last year.
According to Boeing, 64 percent of all seats in India are currently being provided by low cost carriers. Interglobe Aviation-owned IndiGo Airlines' seat capacity rose 35 percent on year in December while that of Jet Airways declined 5 percent in the same period.
"Only pitfall is India's aviation growth is not profitable growth," Keskar said, adding that it is "important that discipline comes into fare pricing else airlines to continue to get hurt."
Fuel prices, exchange rate, low yields continue to remain headwinds for Indian airlines, said Boeing.
The International Air Transport Association (IATA) raised similar concerns earlier this year.
“India’s regulatory and tax framework around fuel hits airlines serving this market even harder,” Alexandre de Juniac, chief executive officer of IATA, said in September. “India is a particularly challenging place to do business.”
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